How to Build a More Solid Financial Structure
The goal is to help people climb the ladder of economic security as they acquire skills and experience. Unfortunately, a lot of those people with one foot on the ladder often have the other foot on the scale.
And the farther up the ladder they go, the "wider the stance," so to speak, when it comes to straddling the scale.
It makes for an uncomfortable stretch. But maybe there's a way to climb each rung while simultaneously pulling closer to a straight and upright position.
It comes down to a debate over how you get paid: Do you want a bottom-rung sum with a government-sponsored bonus once a year at tax time, or would you rather have some bank handed to you as you climb?
You could call for a higher minimum wage, regardless of what the market can bear, and then receive the Earned Income Tax Bracket subsidy during tax season. Or lower-income households could receive a direct wage subsidy calculated on the basis of a worker's hourly wage and inserted into every paycheck.
A direct, paycheck-based wage subsidy, added weekly or biweekly to the paychecks of workers earning low hourly wages, would be more efficient and more effective. The subsidy could be calculated as half the gap between a worker's hourly wage and the median wage, now between $17 and $18 per hour. So someone earning $10 an hour would receive an additional $3 to $4 for every hour worked. ...
Antipoverty scholar Oren Cass explains that there are several benefits to a wage subsidy, most notably its incentive system.
Because the subsidy is tied to the hourly wage instead of to earnings over the year, workers do not see support phaseout as they or someone in their household works more hours. The government calculates a tax credit like the EITC based on a household's total annual income, and the credit's value begins to decline as income increases—no matter whether that increase is due to a raise or more hours worked. So as members of a household work more, they find themselves losing the credit—a disincentive to work. With a wage subsidy tied directly to the hourly wage, someone working 40 hours per week at $10 per hour can take a second job at the same wage, or another family member can take a low-wage job, and every new hour will still earn the subsidy. The phaseout occurs only as workers receive raises.
Imagine how an immediate boost in your own wages could help to improve your financial situation. If you’re living paycheck to paycheck, an additional immediate boost to your earnings could enable you to more easily pay the bills and even have some more disposable income.
Under this system, workers are not disincentivized from taking on more hours. If anything, it provides incentive to work more, because the more hours they work, they more they take in from wages and from the subsidy.
And it doesn't break the taxpayer bank, as long as funding comes from replacing other, less effective antipoverty programs.
Now, if politicians could just straddle their ideological differences, everyone could stand taller.